NEW YORK - Builders’ confidence in the market for new single-family homes improved but remained quite low as the National Association of Home Builders' housing market index - a monthly gauge of builder sentiment – gained to 18 in October from 14 in September.
Thomson Reuters' poll of economists predicted the index would rise to 15.
“Builder confidence regained some ground in October due to modest improvements in buyer interest in select markets where economic recovery is starting to take hold and where foreclosure activity has remained comparatively subdued,” said NAHB Chairman Bob Nielsen. “That said, confidence remains quite low as builders continue to confront overly restrictive lending policies that are discouraging prospective buyers, problems with new-home appraisals and widespread uncertainty regarding federal support for homeownership.”
“This latest boost in builder confidence is a good sign that some pockets of recovery are starting to emerge across the country as extremely favorable interest rates and prices catch consumers’ attention,” NAHB Chief Economist David Crowe said. “However, it’s worth noting that while some builders have shifted their assessment of market conditions from ‘poor’ to ‘fair,’ relatively few have shifted their assessments from ‘fair’ to ‘good.’ One reason is that builders are facing downward pricing pressures from foreclosed homes at the same time that building materials costs are rising, and this is further squeezing already tight margins.”
Derived from a monthly survey that NAHB has been conducting for more than 20 years, the NAHB/Wells Fargo HMI gauges builder perceptions of current single-family home sales and sales expectations for the next six months as either "good," "fair" or "poor." The survey also asks builders to rate traffic of prospective buyers as either "high to very high," "average" or "low to very low." Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor.
All three component indexes increased in October. The current single-family home sales index climbed to 18 from 14, and the sales expectations index for the next six months soared to 24 from 17. The traffic of prospective buyers index increased to 14 from 11.
